BRIC countries boost bank business lending - G8 lowers it

Opinion

An interesting study by UHY International shows how the BRIC countries have increased lending to businesses by 62% since the Lehman Brothers collapse in 2008 whilst the G8 has seen an overall fall of 4%. The two G8 countries in bottom place are the UK with a fall of 13% and the US with a fall of 16%. Perhaps no surprise that China has shown the largest percentage growth at 65% followed by Russia at 53%, India at 49% and Brazil at 39%. Chinese banks were lending $6.9tr to businesses at the end of 2011 compared with $2.77tr by the US and $673bn by the UK. It should be noted that Russia is also part of the G8 and has therefore helped to make the fall within that group appear less.

Amongst the larger European economies with improved lending to businesses the Netherlands lent 19% more to business in 2011 compared with 2008, Italy 5% more, France 5% more and Germany 3% more. Ireland, as you might expect, lent 42% less. The problems in Denmark are illustrated by a 29% fall and Estonia saw a 19% fall. Three other major countries that showed a significant fall were Japan down 4%, Australia down 6% and Canada down 7%.

Related to the above, today, the day before the UK budget the Chancellor of the Exchequer finally published details of the National Loan Guarantee Scheme. This is a loan guarantee scheme to help businesses with under £50m turnover borrow unsecured from banks. The banks have to promise to lend to the businesses at a rate 1% lower than would otherwise be the case. The government emphasises that it is not guaranteeing the lending to any particular business.

It is billed as a £20bn (€24.1bn $31.7bn ¥2,648bn Y200.6bn) scheme though only £5bn is to be made available in the first tranche. There is also a £5bn maximum offered per bank. There can be few outside of the government who believe the scheme will make any noticeable difference to the problems businesses have in borrowing from the banks in the UK. It is more probable that like quantitative easing, this will be seen as yet another taxpayer subsidy for banks rather than a help to business.